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The Federal Reserve & C.D. Rates
Old 03-22-2018, 11:55 AM   #1
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The Federal Reserve & C.D. Rates

Yesterday morning I was setting up a 12 month cd ladder @ fidelity.



I was just about to complete the order, when I remembered that the feds were going to make a decision on interest rates that afternoon. (+.25)
I checked the rates for the 1 year ladder just now & there's no change.

Would it pay to wait a week or 2 & see if those rates go up, or is the 1/4 point hike already ‘priced in’ ?
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Old 03-22-2018, 02:01 PM   #2
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Originally Posted by ownyourfuture View Post
Yesterday morning I was setting up a 12 month cd ladder @ fidelity.



I was just about to complete the order, when I remembered that the feds were going to make a decision on interest rates that afternoon. (+.25)
I checked the rates for the 1 year ladder just now & there's no change.

Would it pay to wait a week or 2 & see if those rates go up, or is the 1/4 point hike already Ďpriced iní ?
On a related note, where did you see a new issue CD for 1 year at 2.15% at Fidelity? I only see 2.10%. I see a Wells Fargo at 2.15%, but it is for 13 months.
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Old 03-22-2018, 02:23 PM   #3
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I think you are making nickels crap pennies at least that what I was doing earlier in the week. I just bought a 3 mo for 1.89 two days ago and will continue to ladder in the short term cash I have and will need the next few months. I really don't think it matters.
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Old 03-22-2018, 02:52 PM   #4
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I think you are making nickels crap pennies at least that what I was doing earlier in the week. I just bought a 3 mo for 1.89 two days ago and will continue to ladder in the short term cash I have and will need the next few months. I really don't think it matters.
The Fed has its eyes set on planned multiple increases over the next few years. This will only happen if the economy remains strong. Get out of your own way and spread out your CDs for a certain length of time. Don't get too caught up in a 1/4 of a point.

I spread my cd's over 7 years and accept the best rate on the day of purchase. The real important thing for me was to have this cash out of equities in order to stay at an AA which is comfortable to me.
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Old 03-22-2018, 02:57 PM   #5
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Old 03-22-2018, 02:57 PM   #6
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Originally Posted by ownyourfuture View Post
Yesterday morning I was setting up a 12 month cd ladder @ fidelity.



I was just about to complete the order, when I remembered that the feds were going to make a decision on interest rates that afternoon. (+.25)
I checked the rates for the 1 year ladder just now & there's no change.

Would it pay to wait a week or 2 & see if those rates go up, or is the 1/4 point hike already Ďpriced iní ?
Iím interested to see how quickly short term CDs react to the 0.25% interest rate hike. I donít think itís priced in yet. Seems like more short rates and savings will have to move up to 1.75% or better.

Sometimes there is a lag.
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Old 03-22-2018, 03:52 PM   #7
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On a related note, where did you see a new issue CD for 1 year at 2.15% at Fidelity? I only see 2.10%. I see a Wells Fargo at 2.15%, but it is for 13 months.
I just completed the order, & it is indeed for 13 months. But the picture I posted in the original post is from fidelity & says 2.15% for 12 months ?
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Old 03-22-2018, 04:00 PM   #8
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I donít think itís priced in yet. Sometimes there is a lag.
I've got more cash available if that turns out to be the case
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Old 03-22-2018, 04:11 PM   #9
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I've got more cash available if that turns out to be the case
It's tough to say, because today interest rates dropped dramatically probably in response to whatever pushed the DOW down 700 points.

Yet they rose just as dramatically the two days prior.

So volatility is pretty high these days.
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Old 03-22-2018, 05:57 PM   #10
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I think you are making nickels crap pennies


I never heard that one. Fantastic!
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Old 03-22-2018, 06:17 PM   #11
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Originally Posted by ownyourfuture View Post
Yesterday morning I was setting up a 12 month cd ladder @ fidelity.



I was just about to complete the order, when I remembered that the feds were going to make a decision on interest rates that afternoon. (+.25)
I checked the rates for the 1 year ladder just now & there's no change.

Would it pay to wait a week or 2 & see if those rates go up, or is the 1/4 point hike already Ďpriced iní ?

Love the ladder. I think I would go out a little bit more. Maybe 36 months. I always go for the best rate when one comes due. 5 years / 10 years doesn't matter. If you keep them in a bank or credit union make sure you can get the interest out if need be. Brokered CD's put the cash in a different area. Just had an opportunity to buy a 4% CD from Sharonview CU. I went to Navy Federal and took out almost 90k of interest on CD's that were paying 3.2% and put it in the 4% CD. Hope the rates go up, but it is very hit or miss.
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Old 03-23-2018, 05:41 AM   #12
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Yesterday morning I was setting up a 12 month cd ladder @ fidelity.


3 month T-Bill is about 1.72% and 6 month T-Bill about 1.95%. A ladder does not have to be all CDs.
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Old 03-23-2018, 06:07 AM   #13
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I just completed the order, & it is indeed for 13 months. But the picture I posted in the original post is from fidelity & says 2.15% for 12 months ?
In predefined retrievals, like 1-year, 2-years, 3-years, Fidelity applies a maturity date range...which makes sense. If you start on Fidelity's fixed income landing page, the page before going to the one for the laddered CDs, in the yield table, click on the 2.15% CD rate shown under the 1-year heading. In the resulting screen, the right column clearly indicates the period is 13 MO. If you go down a few rows, you'll see they also include one with Feb-2019 maturity (again, as part of the 1-year basket) which says 11 MO.

https://fixedincome.fidelity.com/ftg...19&domId=ywv14

In the above link, which they are using for the 1-year retrieval, if you look at the address in the header of your browser, deciphering you can see the range they are using is 1-Feb-2019 - 1-May-2019.
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Old 03-23-2018, 08:28 AM   #14
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3 month T-Bill is about 1.72% and 6 month T-Bill about 1.95%. A ladder does not have to be all CDs.
I've decided to go with T-bills for my short-intermediate cash for now in this interest rate environment. Most has been sitting in online savings. Keeping some powder dry for when I want to buy more equities. Sitting tight for now but if market drops, will need to rebalance.
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Old 03-27-2018, 02:46 PM   #15
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3 month T-Bill is about 1.72% and 6 month T-Bill about 1.95%. A ladder does not have to be all CDs.
I'd prefer T-bills but minimums at Schwab and Fido were oddly high. Of course, I could buy via my Treasury Dirct account but it's been inactive for a long time.
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Old 03-27-2018, 03:53 PM   #16
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I already have a follow-up question: I'm sure there's a logical explanation. I've been with Fidelity since 1986, & every time I think I catch them doing something wrong, they always turn out to be right. which is a great!

Here's a screen shot I took a few minutes ago.


Why does it show that I'm minus $2.30 on the 13 month CD ?
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Old 03-27-2018, 05:08 PM   #17
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I am not as much into fixed income tuning as you guys, but I know that the web quotes cannot be more up to date than the information I can get from the Schwab bond desk and the web quotes could well be less up to date. So I never buy off the web site, even though once in a while they do nick me the standard $25 talk-to-a-person fee. (Usually they waive it.)

So, to the OP, when you have questions like this why not just call the bond guys at Fido and ask them?
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Old 03-27-2018, 05:16 PM   #18
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I already have a follow-up question: I'm sure there's a logical explanation. I've been with Fidelity since 1986, & every time I think I catch them doing something wrong, they always turn out to be right. which is a great!

Here's a screen shot I took a few minutes ago.


Why does it show that I'm minus $2.30 on the 13 month CD ?
Schwab does the same. It is the gain/loss if sold today at current market value on the secondary market. It can be ignored if holding until maturity.
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Old 03-27-2018, 05:20 PM   #19
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I already have a follow-up question: I'm sure there's a logical explanation. I've been with Fidelity since 1986, & every time I think I catch them doing something wrong, they always turn out to be right. which is a great!

Here's a screen shot I took a few minutes ago.


Why does it show that I'm minus $2.30 on the 13 month CD ?
A CD in a brokerage account is just a specific type of bond. As such, at any time it has a value which will fluctuate. Like any bond, the CD is marked to market each evening and the value will be a function of interest rates and the amount of time to maturity. Assuming you plan to hold to maturity, the value and profit/loss it shows is just noise - you will get face value back at maturity.
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Old 03-27-2018, 05:24 PM   #20
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Originally Posted by ownyourfuture View Post
I already have a follow-up question: I'm sure there's a logical explanation. I've been with Fidelity since 1986, & every time I think I catch them doing something wrong, they always turn out to be right. which is a great!

Here's a screen shot I took a few minutes ago.


Why does it show that I'm minus $2.30 on the 13 month CD ?
Because it tracks the value on the secondary market and interest rates have risen since you bought it. It doesn't really matter because if you let it mature (rather than trying to sell it early) you will redeem it at the full initial principal value.
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